An FTC study of business practices of patent assertion entities “does not, for the most part, support the patent troll caricature and, for better or worse depending on one's point of view, diminishes the utility of PAEs as a poster child for reform,” said Technology Policy Institute Senior Fellow Thomas Lenard in a blog post Monday. The commission in early October proposed changes aimed at mitigating what it called “nuisance infringement litigation” brought by a subset of PAEs. The study identified two distinct categories of PAEs -- “litigation” PAEs that relied largely on the use of revenue sharing arrangements to acquire patents and “portfolio” PAEs that bought patents outright. The more problematic PAE subset -- “litigation PAEs” -- were more common among the 22 entities included in the review and were responsible for the vast majority of nuisance litigation (see 1610060045). The study “found no evidence of large-scale demand letter campaigns for low-revenue licenses, one of the elements of the patent troll narrative,” Lenard said. “The FTC also found no evidence that PAE patents are low quality as evidenced by their receiving more citations than the average patent.” The report "acknowledges that its results are not generalizable since the lack of data on the universe of PAEs makes it impossible to draw a statistical sample," Lenard said. "To the extent the data are descriptive of PAEs generally, they do not lead to unambiguous policy recommendations, although the report makes several.” The FTC’s recommendations “do not follow from the rest of report,” Lenard said. “More importantly, we do not know if the proposed reforms would be beneficial because they have not been subject to any sort of benefit-cost analysis. This is especially important because the reforms would appear to apply to all patent litigation (not just PAEs) and perhaps even other types of litigation.”

The Electronic Frontier Foundation said it supports liquid sweetener company Heartland Food Products Group's petition to the Supreme Court for a writ of certiorari seeking a review of 28 U.S.C. Section 1400(b), which requires a plaintiff to bring a patent infringement lawsuit only in a U.S. District Court where the defendant resides or where the defendant has an “established place of business.” Heartland is seeking a high court review of an April Federal Circuit Court of Appeals ruling in Heartland v. Kraft Foods Group Brands against Heartland's push for stronger limits on patent suit venues. The Federal Circuit since 1990 has said Section 1400 “means that companies that sold products nationwide can be sued in any federal court in the country on charges of patent infringement, regardless of how tenuous the connection to that court,” said EFF Staff Attorney Vera Ranieri in a Thursday blog post. Ranieri said the FTC report on its study of the business practices of patent assertion entities found 53 percent of lawsuits by entities in the study occurred in the U.S. District Court based out of Tyler, Texas (see 1610060045). Unbridled venue rules have “led to a remarkable situation of forum shopping in patent cases,” EFF and Public Knowledge said in a joint amicus brief. “Even more remarkably, evidence suggests that this arrangement may be drawing courts into competition to attract patent owners -- the ones with unilateral choice over forum -- by adopting practices and procedures favorable to patent owners.” Forum shopping “has tangible, substantive effects on outcomes, a result contrary to principles of law and contrary to the very existence of the Court of Appeals for the Federal Circuit, an institution designed to eliminate a perceived problem with forum shopping for favorable substantive patent law,” EFF and PK said. HP, Oracle and 30 other companies also are jointly backing Heartland's petition to the Supreme Court.

CTA President Gary Shapiro lauded the FTC report on the business activities of patent assertion entities. The report said "litigation” PAEs are responsible for 96 percent of all patent infringement lawsuits brought by entities included in the review. Patent royalties generated by litigation PAEs' licensing agreements were generally less than the threshold for patent litigation costs, which showed those entities’ suits qualify as “nuisance” lawsuits, the FTC said. The agency made several recommendations to balance the rights of defendants during the early stages of patent suits brought by PAEs (see 1610060045). The FTC report shows “how sleazy” PAEs “operate,” Shapiro said in a statement. “We are pleased that the FTC report calls for many of the critical reforms for which CTA is advocating, including heightened pleading standards and discovery reforms that would make these illegitimate troll cases more transparent and help victims fight back. Moreover, the findings from this report underscore the need to pass legislation … to preserve our nation's entrepreneurial spirit and grow our innovation economy.” The Computer & Communications Industry Association and Internet Association were among those who praised the report.

The Patent and Trademark Office sought comment Friday on a rulemaking to adjust several patent fees to cover changes in the cost of PTO patent operations, Patent Trial and Appeal Board operations and administrative services. The NPRM follows PTO's study last year of existing patent fees. The office last raised fees in 2013. Proposed fee hikes include rises in costs associated with large entities' utility and design patent applications and those entities' requests for re-examination of a patent application, PTO said in a notice to be published in Monday's Federal Register. PTAB trial fees would also rise, with some fees associated with board trials rising by up to $5,000. The NPRM also would restructure some service fees and expand entities' ability to qualify for a discount, the PTO said. The office said it plans to use the additional revenue to fund PTAB's increased workload, maintain momentum for efforts to decrease PTO's backlog of pending applications and increase the office's reserve balance. Comments are due Dec. 2.

GAO is recommending the Patent and Trademark Office take steps to more consistently define patent quality and better communicate its patent quality standards in agency-produced documents. GAO said in a report released Wednesday that the number of new patent infringement lawsuits is continuing to rise despite recent PTO efforts to address patent quality. GAO praised PTO for its recent efforts, including the enhanced patent quality initiative, but said the agency’s lack of a consistent definition of patent quality makes it “unable to fully measure progress toward meeting its patent quality goals.” GAO said 70 percent of PTO’s patent examiners don’t believe they have sufficient time to do a thorough review of a patent application given current workloads, meaning PTO should reassess its workload requirements and the time it allots per patent examination. PTO “generally agreed” with the findings and is taking steps to implement the recommendations, GAO said.

The Patent and Trademark Office remains “open to making whatever changes are necessary to ensure the [Patent Trial and Appeal Board (PTAB)] trials are as effective and as fair as possible, provided those changes fall within our congressional mandate,” said PTO Director Michelle Lee during a Federal Circuit Judicial Conference event Monday. PTO issued revised PTAB rules earlier this month (see 1604010064) after voluntarily using a rulemaking process that included public comment, Lee said in prepared remarks. “The process we followed here is an excellent example of how we are never satisfied with the status quo, we are always looking for ways to improve, and we listen carefully to public input.” The revised rules allow PTAB to continue using a strict standard for re-examining most patents. Other revisions included allowing patent owners to file new evidence in opposition to a challenge and a rule requiring petitioning parties to prove they are not trying to abuse the PTAB system.

The Patent and Trademark Office issued final changes Friday to the Patent Trial and Appeal Board's rules, allowing PTAB to continue to use a strict standard for re-examining most patents. PTAB will use a different standard -- the one used by federal district courts -- in cases where a patent would expire while the board is evaluating patent re-examination, PTO said in a notice in the Federal Register. The revised PTAB rules also will allow patent owners to file new evidence in opposition to a challenge and will require petitioning parties to prove they're not trying to abuse the PTAB system, the PTO said. The office said it won't continue a pilot program in which only one PTAB judge would evaluate whether to take up a patent re-examination case “after receiving negative responses” from stakeholders.

CTA added its support to Senate patent litigation reform legislation (S-2733) that would revamp rules for placement of patent infringement lawsuits in federal courts, requiring at least one of the parties involved in the lawsuit be connected directly to the jurisdiction in which the lawsuit is filed (see 1603180057). “Limiting patent trolls' ability to ‘forum shop’ for favorable courts is one way to provide some level of relief to American innovators from frivolous patent litigation,” CTA President Gary Shapiro said in a letter Tuesday to S-2733's sponsor, Sen. Jeff Flake, R-Ariz., and its co-sponsors, Sens. Cory Gardner, R-Colo., and Mike Lee, R-Utah. The bill “specifically” would “help solve the discrepancy in the Eastern District of Texas, where 44 percent of patent cases were heard last year,” Shapiro said. “However, 44 percent of alleged patent infringement is not occurring in East Texas.” Forum-shopping “by patent abusers is unjust, particularly for small businesses that cannot afford to fight a patent case in a part of the country where they do not operate,” Shapiro said. “Roughly 80 percent of patent troll victims are small and medium-size businesses, and these smaller businesses often lack the financial resources to hire high-priced attorneys to fight the trolls’ bogus infringement claims. Our justice system cannot remain skewed for entities like patent trolls who do not create anything and make a living off of baseless threats and frivolous lawsuits.” Patent trolls “thrive by exploiting many aspects of our legal system,” and shopping “for suitable venues is one of their many tactics,” Shapiro said. “Venue reforms like those included in S. 2733, in addition to other critical reforms such as heightened pleading standards, reasonable discovery limitations, fee shifting, and customer stay, will give American innovators the tools they need to fight back against patent trolls.”

Reps. Tony Cárdenas, D-Calif., and Blake Farenthold, R-Texas, jointly reintroduced their Trade Protection Not Troll Protection Act Tuesday. The bill, which the House didn't consider when it was introduced during the 114th Congress, would require patent assertion entities to have a “vested interest” in a patent before the PAE could seek an International Trade Commission patent infringement investigation. The bill would also give the ITC more leeway to consider at any point in the investigation whether an investigation is in the public interest, rather than only when making a final determination in a case. The bill would codify the ITC's 2013 pilot program that allows a 100-day expedited fact-finding and hearing process in patent investigations. “American businesses are being crippled by the bureaucracy it takes to fight these claims,” Cárdenas said in a news release. Patent litigation abuse “is a drag on our economy and it stifles innovation,” Farenthold said in the release. “Our legislation curbs the problem by targeting abusive patent trolls and discouraging frivolous patent lawsuits.” Both CTA and Public Knowledge lauded Cárdenas and Farenthold for reintroducing the bill, which was supported by Cisco, Dell and Google. The bill will allow the ITC to “continue to be a robust resource for U.S. companies, but it will be a less attractive venue for frivolous patent extortion,” said CTA CEO Gary Shapiro in a statement. “The ITC has become an increasingly popular venue for patent disputes due to its strong power to exclude products at the border,” said PK Director-Patent Reform Project Charles Duan in a news release. “But that strong exclusionary power invites abusive practices that damage American businesses and consumers.”

Sen. Jeff Flake, R-Ariz., bowed his Venue Equity and Non-Uniformity Elimination Act (S-2733) Friday, quickly drawing support from several industry advocates of patent revamp legislation. S-2733 would revamp rules for placement of patent infringement lawsuits in federal courts, requiring at least one of the parties involved in the lawsuit be connected directly to the jurisdiction in which the lawsuit is filed. Sens. Cory Gardner, R-Colo., and Mike Lee, R-Utah, co-sponsored S-2733. Patent revamp advocates have sought legislation like S-2733 to address what they view as misuse of current forum rules to place patent cases in courts viewed as friendly to such lawsuits, particularly the U.S. District Court in Tyler, Texas. That court district was the venue for 44 percent of all patent lawsuits in 2015. Computer and Communications Industry Association President Ed Black backed S-2733 Friday, saying in a statement that changing venue rules "will change the climate, and hopefully, change the profitability of these frivolous patent suits." Software & Information Industry Association Senior Vice President-Public Policy Mark MacCarthy said in a statement the bill would “restore balance to choice of forum rules in patent cases and address this economically damaging abuse of the legal system.” Dish said S-2733 “will help protect innovators from the growing problem of patent trolls.”